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Thursday, May 10, 2012

The only manual overrides Mr. Allard said he was aware of were for large tax-exempt properties, such as colleges and hospitals.

WORCESTER — A former city assessor insists that computer-generated valuations for commercial and industrial properties were not manually overridden by staff during his tenure at City Hall to produce artificially lower assessments for business properties.

Robert J. Allard Jr., who served as city assessor from 2002 to 2009, said valuations for the city's 3,000 commercial and industrial properties were always determined by using the industry-standard income approach.

He said it was never a practice of his office to override the computer-generated data for commercial and industrial properties and establish lower assessments, and he is unaware of any instances of it ever happening.

“There is absolutely no truth to that,” Mr. Allard said in a telephone interview from his home in California.

But city officials stand by their contention that assessors for years had been manually overriding valuations set by computer program on as many as 2,000 of the city's commercial and industrial properties.

City Manager Michael V. O'Brien said the data and information shows there was “human intervention” to reduce the assessed valuations of those business properties below what was called for by computer programs.

“Things were done (in the Assessor's Office) that did not follow the standards of the (state Department of Revenue) and I have the charge of cleaning it up,” Mr. O'Brien said.

While assessments for residential properties are largely derived on the basis of sales of comparable properties, establishing valuations for commercial and industrial properties is much different. The income approach is most applicable to business real estate that is normally bought and sold on the basis of its income-producing capabilities.

In the process of modernizing the city's property revaluation systems, city assessors said they uncovered a practice that allowed assessors to manually enter a data element or formula into the assessment system and override the resultant valuation that should have been calculated by the system.

As a result, they said, commercial and industrial property values were based on an artificial override and not on the internal calculations of the system. All of those manual overrides have since been removed, and what has resulted is a dramatic increase in the assessed valuations of many commercial and industrial properties.

But Mr. Allard said it is inconceivable that there could have been as many as 2,000 manual overrides of commercial and industrial properties because there are only roughly 3,000 such properties in the city. Of other commercial properties, he said there are 600 mixed-use (residential and business uses); 1,100 residential properties with four to eight units; and about 200 residential properties with nine units or more.

He said the letter “m” that was put on many property cards meant that the respective property had been assessed by using the market approach — determining valuation through comparable sales — and did not signify that the assessed values for those properties had been manually overridden.

In many instances, he said, the “m” designation was applied to apartment buildings.

Mr. Allard said the designation was also given to vacant commercial and industrial properties. He said the income method of assessing business properties could not be used on those properties because they were not generating any income.

He said the only manual overrides he was aware of were for large tax-exempt properties, such as colleges and hospitals.

By law, the city is still required to assign assessed valuations to non-taxpaying properties. Instead of assigning personnel and spending money to go out in the field to inspect and assess those properties, the Assessor's Office used financial statements from those institutions to set property valuations as best it could.

But William J. Ford, who succeeded Mr. Allard as city assessor in 2009, said the documentation the city has clearly shows that some 2,000 commercial and industrial properties had a manual override on them that drastically affected the value of the property.

“Having not been here, I cannot speak specifically to the what, whys and when,” Mr. Ford said yesterday. “I do not have any backup documentation or notes in the file to say when these changes and adjustments occurred. There could have been reasons at one time or another, but when you review the property as it stands today, there is no place in law or DOR regulations for this override to exist.

“I cannot speak for previous assessors,” he added. “All I know is that when I came on board I was asked to do a top-to-bottom review of the (assessing) division. I found property cards that indicated that properties had not been inspected for more than 25 years, some dating back to 1985.

Meanwhile, District 3 City Council George J. Russell has challenged the method used in setting new assessed valuations for commercial and industrial properties, contending it may be a big reason assessments for those properties have skyrocketed.

Mr. Russell questioned whether the city was “bullied” by the state to use an income approach to generate a fair-market value for those properties.

“I want to know if the city of Worcester had a choice at all in picking the process that was used to assess commercial and industrial property,” the councilor said at Tuesday's City Council meeting. “The way we put values on these properties was neither fair nor equitable. Did the state force us to use the income approach for businesses?

“The process has to be reviewed,” he added. “I'm frustrated by all heck by this. I'm asking the city to revisit this issue. This city government should be challenging the state of Massachusetts on this.”